A federal appeals court in San Francisco upheld the dismissal by a U.S. District Court of a lawsuit alleging that executives of Hewlett-Packard's 401(k) plan violated their fiduciary duties in the management of company stock within the plan.

Participants in the Hewlett-Packard Co. 401(k) Plan had alleged that managers allowed company stock to remain as an investment option even though the stock was "artificially inflated" and an "imprudent investment," according to court documents.

The plan had $17.7 billion in assets as of Dec. 31, 2014, according to the company's last Form 5500 filing. Hewlett-Packard in November 2015 split into two publicly traded companies — HP Inc. and Hewlett Packard Enterprise Co.

The plaintiffs criticized the executives for inaction following Hewlett-Packard's ill-fated acquisition of Autonomy Corp. PLC, a British software company, according to the complaint in Laffen et al. vs. Hewlett-Packard Co. et al. Plaintiffs argued that plan executives should have prevented the plan from making new investments in Hewlett-Packard stock. The company paid $11 billion for Autonomy in August 2011, then took a $8.8 billion write-down of assets in November 2012.

"A prudent fiduciary in the same circumstances as (Hewlett-Packard officials) could view Laffen's proposed alternative course of action as likely to cause more harm than good without first conducting a proper investigation," said the Jan. 9 opinion by a three-judge panel. "Because Laffen has not plausibly alleged an alternative action (Hewlett-Packard executives) could have taken that was consistent with securities laws and that a similarly situated prudent fiduciary would not have viewed as more likely to harm than help the plan, Laffen fails to plead a claim for breach of the duty of prudence," the judges wrote.

The plaintiffs' class action lawsuit was dismissed twice by U.S. District Court Judge Charles R. Breyer in San Francisco, who rejected an initial complaint in April 2014 and an amended complaint in June 2015. In his second ruling, Mr. Breyer wrote that the participants' arguments "are simply not actionable" under the Employee Retirement Income Security Act and the 2014 U.S. Supreme Court ruling in Fifth Third Bancorp et al. vs. Dudenhoeffer et al., which outlined suggestions for lower courts to consider in evaluating stock drop cases.